'Even Spaceships Must Return to Earth': Morgan Stanley Warns Investors on Virgin Galactic Stock
Ben Bergman
Ben Bergman is the newsroom's senior reporter, covering venture capital. Previously he was a senior business reporter and host at KPCC, a senior producer at Gimlet Media, a producer at NPR's Morning Edition, and produced two investigative documentaries for KCET. He has been a frequent on-air contributor to business coverage on NPR and Marketplace and has written for The New York Times and Columbia Journalism Review. Ben was a 2017-2018 Knight-Bagehot Fellow in Economic and Business Journalism at Columbia Business School. In his free time, he enjoys skiing, playing poker, and cheering on The Seattle Seahawks. Follow him on Twitter.
Take your pick of metaphors – rocketing, earth shattering, stratospheric - Virgin Galactic stock has been surging this year, up more than 200%. The Mojave-based company now has a market capitalization of $7.2 billion even though it only generated $3 million in revenue last year.
Why all the excitement? No one seems to know, including Morgan Stanley, which issued a research note Thursday expressing bewilderment.
"We do struggle to identify significant thesis changing/accelerating events since the time of our initiation in early December of 2019," wrote analyst Adam Jonas in a note titled "Even Spaceships Must Return to Earth."
Jonas said he was surprised by the volume and volatility of the stock and he urged investors to be cautious. "A modest correction is overdue, and frankly, healthy," he wrote.
Investors did not seem phased by the warning, however, as the stock was nearly flat in Thursday's trading session after the note was published, though it dropped nearly 10% in after-hours trading. The stock closed Thursday at $37.26 on the New York Stock Exchange.
Virgin Galactic became the first publicly traded commercial space tourism company in October, going through a reverse merger.
The company's two competitors, Elon Musk's SpaceX and Jeff Bezos' Blue Origin, are privately held. Blue Origin, headquartered near Seattle is funded almost entirely by the Amazon CEO while Hawthorne-based SpaceX is VC and debt funded. The company, which is now valued at over $33 billion, got its latest financing from an $800 million Revolver facility from Bank of America in December.
Virgin Galactic will report earnings for only the second time as a public company on Feb. 25
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If you've ever watched Shark Tank and wished that you could hop in the waters and invest alongside Mark Cuban and Mr. Wonderful, Going Public may be just the show for you.
The new series will showcase five companies preparing to go public on the NASDAQ stock exchange. Over the course of 10 episodes, viewers will follow the company founders as they promote their offering and receive feedback and advice from mentors, professional investors and other executives. Those watching at home who think they've spotted a winner will have a chance to get in on the action at the initial public offering (IPO) price for the companies that end up going public.
<p>"We think we have what may be the most innovative strategy to acquire retail investors at scale in what may be the lowest cost of customer acquisition in the financial services industry," says Darren Marble, co-CEO of Crush Capital, the L.A.-based fintech firm that created <em>Going Public</em>.</p><p>Casting is now open for participating companies, who can apply at <a href="https://goingpublic.com" target="_blank">GoingPublic.com</a>. Marble told dot.LA that the series will be targeting companies with revenues between $25 million to $100 million; about two years of operating history; and a business-to-consumer, retail-oriented business model that is relatively easy to understand – no complex industries like biotech, and no cannabis companies.<br/></p><p>Marble adds that the show will be seeking a diverse pool of entrepreneurs, and that founder charisma is a plus. </p><p>Participating companies will pay Crush Capital an upfront cash payment and stock compensation. Marble says this means his firm will want companies that are strong candidates for success.</p><p class="shortcode-media shortcode-media-youtube">
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</p><p>Production is planned for Q4 of this year, with the series expected to debut in spring of 2021. Plans are in place to allow for filming should the pandemic preclude in-person production, Marble said. Either way, 90% of the show will be shot before it airs, with the ultimate NASDAQ listing aired in or near real-time.<br/></p><p>The show will be produced in partnership with Studio City-based INE Entertainment and will stream exclusively on Entrepreneur.com, operated by Irvine-based Entrepreneur Media, which claims 14 million monthly unique users. The Emmy-nominated INE Entertainment has previously produced reality shows including <em>The Biggest Loser</em> and <em>MasterChef</em>.</p><p>Roth Capital Partners, an investment bank focused on small market-cap companies, is slated to diligence, price and underwrite the IPOs in accordance with Regulation A+, a 2015 amendment to the bipartisan 2012 JOBS Act. Together, these regulations effectively <a href="https://www.forbes.com/sites/kevinharrington/2015/05/22/new-jobs-act-regulation-a-will-be-a-game-changer/#8d4be107f3f2" target="_blank"><u>make it easier for companies to raise money</u></a> from the public, and for more people to have access to IPO investment opportunities. They also eliminate the need for a "quiet period" wherein a firm must refrain from disclosing information for a time leading up to the offering. </p><p>Marble notes that the last five years of Reg A+ offerings have largely missed the mark because they did not attract enough institutional investors, often considered "smart money."</p><p>"What's (been) missing is that the deals aren't attractive to hedge funds, pension funds, mutual funds, family investors," he says. Now, however, in what he calls an "industry first," Roth is guaranteeing the deal. "Ultimately what that means is there's going to be strong institutional demand for these deals."<br/></p><p>In a statement, Byron Roth, Chairman and CEO of Roth Capital, said "we believe that institutional pricing, firm commitment underwriting, and aftermarket support will help advance the Regulation A+ offering process as envisioned by the JOBS Act."</p><p>To invest, viewers will be able to enter an investment portal via the streaming website. Marble says investments will be accepted once episode 1 airs and will remain available for six to eight weeks. </p><p>Two companies will debut in the first episode, followed by the other three shortly thereafter. The company narratives will unfold on a staggered basis, and they will not be competing with each other. </p><p>Marble says Computershare's <a href="https://www-us.computershare.com/Investor/#Home?gcc=us" target="_blank"><u>Investor Center</u></a> technology will provide the backend infrastructure to clear, settle and execute the trades. Once the companies go public, the shares will be liquid, meaning that investors can either hold their shares in the portal, sell them, or transfer them to a different account.</p><p>"We're creating a retail investor renaissance by allowing viewers from around the world to invest in any featured company while they're watching," said Todd Goldberg, Crush Capital's other co-CEO, in a statement.</p><p class="shortcode-media shortcode-media-rebelmouse-image">
<img type="lazy-image" data-runner-src="https://dot.la/media-library/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yMzQ1NDI2Mi9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTY0NTMzMzM5Mn0.iZbF83whsjD8OsvteF3NJCHOhj4Y1-CYV_kUMKqeqyw/image.jpg?width=980" id="1df24" class="rm-shortcode" data-rm-shortcode-id="b4b35ab7c18e67383342a5fb2e362008" data-rm-shortcode-name="rebelmouse-image" alt="Going Public" />
<small class="image-media media-caption" placeholder="Add Photo Caption...">Todd Goldberg (L) and Darren Marble (R) co-founded fintech firm Crush Capital</small><small class="image-media media-photo-credit" placeholder="Add Photo Credit...">Image courtesy of Crush Capital</small></p><p><br/></p><h3>Risky Business <br/></h3><p>IPOs can be exciting extravaganzas that result in <a href="https://www.fool.com/investing/2019/12/26/these-were-the-10-best-ipos-of-2019.aspx" target="_blank">big payouts</a> for investors, but <a href="https://www.cnbc.com/2019/04/03/dont-be-fooled-by-the-unicorn-hype-this-year-most-ipos-lose-money-for-investors-after-5-years.html" target="_blank">plenty</a> of <a href="https://news.crunchbase.com/news/over-80-of-2018-ipos-are-unprofitable-setting-new-record/" target="_blank">analyses</a> have found that more often than not they lead to exuberance-fueled losses. And with some <a href="https://www.forbes.com/sites/sergeiklebnikov/2020/06/17/20-year-old-robinhood-customer-dies-by-suicide-after-seeing-a-730000-negative-balance/#2a40da2e1638" target="_blank">dark</a> <a href="https://www.bloomberg.com/news/articles/2020-06-19/robinhood-s-newbie-traders-ignore-danger-signs-to-bet-on-markets?sref=QjdS4d5U" target="_blank">stories</a> of late showing the downsides of democratizing investments, <em>Going Public</em> offers no guarantees. </p><p>To mitigate risk, however, Marble says the host of the show, which is still in the casting process, will serve as a disinterested "investment sherpa" to help audiences make investment judgements. The lead candidate for the role is female and a former trader on the New York Stock Exchange, he says. </p><p>The website that hosts the investment platform will also include a section to educate potential investors on risk versus reward and the IPO process. Viewers will also have access to the disclosure that the companies will have to file to the U.S. Securities and Exchange Commission before participating. </p><p>Marble says there may also be individual investment caps, and that the presence of the "smart money" should limit, though of course not eliminate, the risk of swimming alongside the sharks.</p>
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Here’s how L.A.’s Curative Plans to Move Saliva-Based COVID-19 Testing to Other U.S. Cities
May 04 2020
Fred Turner, the 25-year-old founder of Curative Inc., is the man behind L.A.'s push to bring universal testing to the region. But, he has bigger plans.
Turner, an Oxford dropout, just landed a deal with the Air Force to test military worldwide and he's now eyeing national expansion for his startup. By the end of this month, the company he started months ago is expected to pump out more than a million test kits a week.
"We are a strange company because our goal is to essentially put ourselves out of business," Turner said.
<p>Turner, who was named UK Young Engineer of the Year at age 17 when he built a DNA machine from his bedroom to figure out why his brother had red hair and he had brown hair, turned his focus to coronavirus in January. He upended his life as head of Shield Bio, which sought to eliminate sepsis, and moved to Southern California after a local venture capitalist connected him with a lab that he could build out for COVID-19 testing. </p><p>Curative Inc. was born. </p>
<img lazy-loadable="true" src="https://dot.la/media-library/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yMzE4NjM5Ni9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTYxMTkyMDg3Mn0.Fy0dtjHfIsqIXJAOI7MUohie11857cWDACI3OksmLt4/image.jpg?width=980" id="515a2" class="rm-shortcode" data-rm-shortcode-id="7ee43a7a9c8e7ea09bd6cdb251d45ace" data-rm-shortcode-name="rebelmouse-image" />
Curative, Inc. Founder Fred Turner is the man behind L.A.'s push to bring universal testing to the region.
<p>For weeks he lived in hotels as he created what has become the backbone of testing in America's second largest city. The company, one of the few saliva-based tests that have gotten emergency approvals from the FDA, has a 10% false negative rate, according to their own non-peer reviewed studies. Turner argues the rate is better than most of the nasal swab testing out there and oral tests, which can be self-administered, are the only way the country can reopen quickly.</p><p>He is now operating two labs, one in San Dimas another in Washington D.C., with plans for several more across the nation. Meanwhile, the rest of the country is watching to see if Los Angeles' promise of universal testing meets the expectations with some already complaining about the difficulty of securing an appointment.</p>
<p><strong>dot.LA: Curative is responsible for 95% of Los Angeles COVID-19 tests. Can you meet the demand for universal testing?</strong><br/></p><p><strong>Curative, Inc. Founder Fred Turner:</strong> We will be able to fulfill demand. There's more infrastructure that needs to be put in place. With the collection site, the mayor's office has been working hard to scale those up and make sure that the collection site infrastructure is in place. On the lab side, we definitely have enough capacity to serve the area.</p><p>In (the San Dimas) lab we have capacity for about 20,000 per day. We're going to be scaling this lab up to 30,000 over the next week or so, eventually, probably slightly more than that. </p><p>Ultimately, the goal is to do as many tests as we need to reopen the country and I think we've had many different estimates of how many that might be. I've heard estimates (that it will take) as high as five million tests a day to reopen, but the current supply chain is nowhere near going to be able to keep up with that. The next goal we are shooting for is a million tests a week by about mid-May, end of May.</p><p><strong>If we're testing more people will that strain the turnaround time? Right now, I understand it's about 24 to 72 hours. Can you take it down to several hours or even minutes?</strong></p><p>We are always aiming to push it down. I think it can be pushed under 24 hours, but we tend to focus more on scaling it up at that point. I think 24 hours is around optimal as you bring on more capacity. We're obviously being careful to match the capacity coming into the lab against the turnaround. </p><p><strong>Curative is one of the few companies that the FDA has provided emergency approval for use of a saliva test. Do you think this is the answer to universal testing nationally?</strong> </p><p>Oral fluids is the technical term, which is slightly different from saliva. Our protocol involves having the person cough first, which releases virus from the upper and lower respiratory tract. Some of that is then caught in the saliva, and also viruses in the saliva. The idea is you're effectively sampling multiple sites at once, which we think gives a slight increase in the sensitivity of the testing.</p><p>Self-collected sampling has got to be the way forward. There's just no way that we can do a million nasal pharyngeal swabs, or we call them 'brain swabs,' it's just not practical. We don't have the medical staff, and as a country we just can't do that many swabs. And so the way forward is going to be self collection. That's the only thing we can do at scale.</p><p class="shortcode-media shortcode-media-youtube">
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<small class="image-media media-caption" placeholder="Add Photo Caption...">Covid-19 Oral Fluid Test Kit Instructions</small>
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<a href="https://www.youtube.com/watch?v=LNopEE7lC6E&feature=emb_title" target="_blank">www.youtube.com</a>
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</p><p><strong>Curative recently secured a contract with the Department of Defense. What's next?</strong><br/></p><p>We haven't settled on the exact number, but we will be in a large number of states. That is the plan, building out the infrastructure for this kind of testing. We can take the L.A. model and scale it across the country. We have a version of the drive-thru software that other cities and states can take. We have all the training material. We have a team that fly around the country setting up these drive-thru sites. We have really tried to make a plug-and-play package where cities and states that want to launch drive-thru testing, we have everything they need. </p><p><strong>Is Los Angeles a testing ground and a proving ground for national efforts?</strong></p><p>Yeah, I think Mayor Garcetti has definitely demonstrated what can be done if the city moves very quickly to build out the infrastructure, I do think the drive-thru testing, walk through testing is going to be an essential component of this.</p><p>It's just much faster to get the samples to the lab than shipping it out and then shipping it back again. The infrastructure piece is critical for getting these tests out there and we're working with several other states now on building out a similar infrastructure. Some of them have existing programs that we would be plugging into and expanding, and some of them are looking to roll out their own similar programs. You can test a lot more people with the oral tests with far fewer staff.</p><p><strong>What are the challenges with the supply chain in terms of making your tests more widely available?</strong></p><p>We need more plastic, more robots, more people. Most of the components that go into these tests are just already maxed out in their production capacity. And so we've been throwing online a bunch of internal production, such as injection molding to make our swab kit tubes, as well as bringing on other sources of similar materials that are not being used for COVID-19 testing and validating them for COVID. So for the swabs, for example, we use a swab type that is usually used for testing clean rooms. It works just as well for COVID testing, but nobody else is using it for that purpose. </p><p>We don't want to be competing with other people, stopping them from getting access to resources. We want to bring on new supply so it's not a zero- sum game, and the total amount of tests will increase. But, I think distribution is going to be a bigger bottleneck over the next month. Los Angeles has done a fantastic job in building out infrastructure and collection. That needs to happen now across the whole country. </p><p><strong>What would it take to meet national demand?</strong></p><p>It would take a network of multiple labs that we are calling gigalabs that can process 50,000 to 100,000 tests a day across the country and a significant scale up in the production of the physical components that go into the tests. We've been investigating lab sites in a few states, something central like Texas or Colorado. </p><p><strong>Are you concerned that you have too high of a false negative rate at 10%?</strong></p><p>All COVID tests will have false negative rates. In our studies, we demonstrated that the sensitivity is at least as good if not better than the nasal pharyngeal swab tests. So, there will definitely be false negatives as there will be in every test, but we think the data supports us having a low rate of false negatives. The sensitivity is about 90%.</p><p>When you include all patients, the nasal pharyngeal came in at about 79%. A new (non-peer reviewed) Yale study shows a higher sensitivity from saliva and all fluids than the nasal pharyngeal. I don't think we have the evidence to say that we're better yet, but we have the evidence to say that we're at least equivalent. The ease of doing oral tests and the accessibility is obviously significantly better. We're not using PPE. We're not exposing healthcare workers. It's just a much easier test to roll out that people can test themselves.</p><p class="shortcode-media shortcode-media-rebelmouse-proxy-image">
<a href="https://upload.wikimedia.org/wikipedia/commons/f/f9/Florida_National_Guard_%2849677710741%29.jpg" target="_blank"><img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vbWVkaWEucmJsLm1zL2ltYWdlP3U9JTJGd2lraXBlZGlhJTJGY29tbW9ucyUyRmYlMkZmOSUyRkZsb3JpZGFfTmF0aW9uYWxfR3VhcmRfJTI4NDk2Nzc3MTA3NDElMjkuanBnJmhvPWh0dHBzJTNBJTJGJTJGdXBsb2FkLndpa2ltZWRpYS5vcmcmcz0yNzMmaD1hZDI1NWIwOTNkYWE5ODBjMzU4NjMzYWM0YmE2OGYwYmYxZGRlMGNmYjFlNjdjNDhlMjQxZTZkZDZjZDE3YzNhJnNpemU9OTgweCZjPTEzMDE3NDMyMjYiLCJleHBpcmVzX2F0IjoxNjE0NzExNjkyfQ.BvjB0Zw5cLoqqcX5ba4uhPBwCzyao_4h0HSdTdD7IEk/img.jpg" id="cbbc9" class="rm-shortcode" data-rm-shortcode-id="8965d4da3c9fec19960a954cded4abca" /></a>
<small class="image-media media-caption" placeholder="Add Photo Caption...">File:Florida National Guard (49677710741).jpg - Wikimedia Commons</small>
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</p><p><strong>At one point, Curative was attempting to roll out at-home testing and then had to pull back after FDA warnings. Will you be making home testing kits again?</strong><br/></p><p>I can't give a time estimate but we are actively working with the FDA right now. I think their concern is "can people adequately collect the sample, or will they do it wrong, and then get a negative test result," which is incorrect. Our plan is to use telemedicine observation. What we've seen in our clinical studies is that if you give people the chance to do it wrong, they will do it wrong. In fact when you have somebody observing, they read the instructions better and they collect a better sample. We're still working on the pricing and potentially looking at whether there is federal or state reimbursement for some of that testing and the potential of billing insurance. </p><p><strong>Tracing technology has been promising. Do you have any plans to tie tests to these applications to testing?</strong> </p><p>We've had several conversations with contact tracing apps and we continue to work in collaboration with public health departments in their contract tracing efforts. Having the test is obviously one thing, but you have to use the information to actually stem the tide of COVID infection. And so, it is an essential step in working closely with various people. </p><p>I do like the app-based models where you obviously want to maintain people's privacy, but having people opt-in to share their location history if they test positive so you can contact nearby people.</p><p><strong>What does Curative do once there's a vaccine? Are you obsolete?</strong></p><p><strong></strong>The U.S. needs to maintain some kind of spare capacity so that next time we are not having to build all of this during a pandemic. But we are a strange company because our goal is to essentially put ourselves out of business. Ultimately, and I say this to everyone we hire, we don't know how long this will go on for. We want to provide as many tests as needed, but the goal is to end COVID and not be doing COVID testing anymore.</p><p><strong>Curative took off in March when you arrived in Los Angeles from Silicon Valley, how has the journey been for you personally?</strong></p><p><strong></strong>I don't have very much free time, but it's been a lot of fun to be able to work at this pace and have the support of people like the city, the mayor's office to really just do what is needed to scale this up. When we work with suppliers, and we say we're doing COVID testing, they just move heaven and earth to make things happen. It's been really inspiring to be a part of that push forward.</p><p>We are just pushing as hard as we can to scale up as fast as we possibly can and bring on as much testing as we can. The city opening up testing to everybody is kind of a culmination of that. We're making about 50,000 kits a day right now and we want to make that as widely available as we can. I would like to get a little more sleep. </p><p><em>The interview has been edited for clarity and brevity. </em></p><p><em>Correction: An earlier version of this story stated that Curative's saliva tests have a 10% false positive rate. In actuality, the tests have a 10% false negative rate.</em></p>From Your Site Articles
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